Appearing before the House of Representatives Standing Committee on Economics, RBA governor Glenn Stevens said that if he had to choose between unprofitable and profitable banks he would chose the latter.

"You only have to look at the dimension of the banking problems in Europe to see we don't want banks that can't earn a good return," Mr Stevens said.

"Are they too profitable? Our assessment is if you look at the rates of return on equity at our banks over a lengthy period of time they're actually broadly in line with the listed company sector in general."

The big four banks have recently come under scrutiny for raising their variable mortgage rates outside the Reserve Bank's official cycle while at the same time posting record profits.

The banks have blamed weak lending growth and rising funding costs for their rate rises as the eurozone's sovereign debt problems slow economic growth around the world.

Mr Stevens also told the committee he had no plans to intervene in currency markets to reduce the strength of the Australian dollar.

The manufacturing and export sectors have come under pressure as the dollar holds at historically high levels.

Thousands of jobs have been slashed in those industries as a result, but Mr Stevens does not believe intervention would be effective at this stage.

He said Australia's natural resources and its proximity to Asia were behind the currency's strong rise.

"I'm not saying we'd never do it, but we have not done so to date," Mr Stevens said.

"Changes of leadership are destabilising - they affect consumer confidence and they affect business confidence - and the fact that there's going to be a lot of distraction with federal ministers over the coming months can't be helpful," Mr Bradley said.

Mr Bradley said the Government's relationship with the business community had deteriorated in the past year, but he would not be drawn into the debate about who should lead the Labor party.

"We'd welcome any leader, as we welcome Julia Gillard's commitment to better consultation with business around business regulation and a better understanding of the challenges of business," he said.

The minutes say that at the same time, banks continued to compete for deposits, meaning reductions in deposit rates had not fully matched the cumulative 0.5 per cent cash rate cuts in November and December.

"Collectively, these developments had increased banks' overall cost of funding relative to the cash rate and had narrowed the difference between banks' lending rates and funding costs," the board noted.

The Reserve Bank surprised most economists a fortnight ago by leaving the cash rate on hold at 4.25 per cent.

According to the minutes, the RBA board judged the current setting to be "appropriate" given the overall economic outlook.

The RBA's defence of the higher funding cost argument counters claims by Societe Generale's head of strategy in Asia, Christian Carrillo, that banks were wrong to claim funding costs on global markets were higher.

"What we have seen over the last six months is that overall funding costs for Australian banks have absolutely come down," Mr Carrillo told AM.

"Research suggests that effectively pretty much every source of funding that they use - in terms of domestic deposits, short-term funding onshore, long-term funding onshore - has actually gone down. "

Last August, the steelmaker posted a full-year loss of $1 billion and slashed a total of 1,000 jobs at its Port Kembla steelworks in New South Wales and its Western Port steel mill in Victoria.

Chief executive Paul O'Malley says the company expects to record a much smaller loss this half as the benefits of the restructure flow through to the bottom line.

"Really the story is of a bipolar company in many respects," Mr O'Malley said.

"The Australian business is really challenged but we have taken significant steps to restructure and improve that performance, and as I mentioned we'll start to see improvements - material improvements - in that business performance in the coming months."

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About Peter Ryan

is the Australian Broadcasting Corporation's Business Editor, contributing to a range of ABC News programs including the flagship radio current affairs program AM and ABC News 24. Peter developed ABC business programs including Lateline Business and Business Today. He was the ABC's Washington Bureau Chief in the 1990s and has served in management positions including Head of TV News & Current Affairs in Melbourne.